Air India divestment back on the table

So is the linked issue of FDI norms in aviation

With the Left parties off its back, the new government has brought the disinvestment of Air India back on its agenda.

The proposal had been first mooted during the NDA government and had been carried on to the previous UPA government. Government sources said the idea was frozen after firm opposition from the Left, as well as growing losses of the former ‘national carrier’.

“This is one point that has been put (back) on the table. Like earlier, the mode of an initial public offering (IPO) would be looked at,” said a government source.

A spokesperson of National Aviation Company of India Ltd (Nacil), the government company which owns the carrier, refused to comment.

Experts say with annual losses mounting to Rs 3,000 crore, as per figures disclosed by civil aviation ministry sources, an IPO is unthinkable in the near future. AI’s losses in 2008-09 are understood to have doubled as compared to 2007-08, when these stood at Rs 1,500 cr, according to official sources.

At a Nacil board meeting in Mumbai yesterday, discussions were held on the requirement of working capital worth Rs 3,000 cr, likely to be raised through debt. AI’s debt figure is understood to be touching Rs 14,600 cr already.

“Given the current valuation, the divestment would take another three to four years. And not more than 15 per cent equity stake will be put on the block,” the government source said.

Experts say disinvestment has to be seen with the related issue of changing foreign direct investment

(FDI) norms in the Indian aviation industry, expected to be an important point in the new government’s agenda.

The existing norms do not allow any FDI from foreign airline companies. Indian carriers, headed by Kingfisher, have been lobbying for allowing up to 49 per cent stake in Indian carriers from foreign airlines.

“Only if FDI from foreign carriers is allowed would it make sense to go for disinvestment of the national carrier,” said an industry expert.